Saturday, November 17, 2007

Government Asserts Right to Control Food Prices in Bolivia

The Bolivian Minister of Development Planning announced that the government would be intervening and setting the prices of basic food items in Bolivia. The Minister, Gabriel Loza, said that the governments controls were going to be put into effect to prevent speculation in this key area of the economy. Loza said that the problems with inflation for food items were concentrated in about five to seven basic food items, and that those would be the ones regulated.

Loza complained that there was an abundance of certain types of food being exported, but that there remained shortages within the country. He said that within a country as small as Bolivia, there was a small oligopoly that controlled many of the food prices and distorted them, making it necessary for the state to intervene in the food prices of products such as sugar and flour. Loza also stated that "distortions" in the chain of production of certain foods, such as meat, were making it difficult for the average consumer.

Loza claimed that the government had the power to regulate food prices, noting that the Constitution and the National Development Plan both gave the government the right to intervene in strategic sectors of the economy.

Food suppliers disagreed with the Bolivian government and noted that government-controlled food prices was a disincentive to productivity and also put efficient production in danger. The Manager of the Eastern Chamber of Agriculture said that the price controls had already caused him to switch crops, from corn to sesame, explaining that importation rules will allow foreign producers an advantage over domestic ones in certain sectors. Another producer stated that state-controlled prices were a blow to the industry.

Discussion:1. How should governments balance consumers' interest in affordable prices for basic items with the potential for shortages and inflation that government-set price controls and intervention may cause?

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